State aid: Commission requires Italy to recover around €18 million incompatible state aid from metal producers Portovesme, ILA and Eurallumina

The European Commission has found that operating aid granted by Italy to Portovesme, ILA and Eurallumina in the form of subsidized electricity prices is incompatible with EU state aid rules and needs to be recovered. After an in-depth investigation, the Commission concluded that the preferential tariffs offered to these companies merely reduced the operating costs of the beneficiaries and improved their competitive position without furthering any goal of common interest. The Commission also prohibited the project to grant identical tariffs as of 2005 in favour of the same beneficiaries plus chlorine producer Syndial.

"Together with the EU, governments must strive to achieve a truly single market for energy that will increase Europe's energy efficiency and independence as well as lower prices for companies and consumers. This is the way to go, not subsidies to lower prices artificially for a few companies," saidJoaquín Almunia, Commission Vice-President in charge of competition policy.

Following in-depth investigations (see IP/06/541) the European Commission has concluded that two preferential electricity tariff schemes introduced in the Italian Region of Sardinia in favor of three energy-intensive companies constituted incompatible operating aid. The companies are Portovesme, a zinc and lead producer, Eurallumina, which produces aluminum, and ILA, a manufacturer of processed aluminum products.

Italy argued that it had to subsidize the energy-intensive companies because electricity is more expensive in Sardinia. The scheme was financed by all electricity users in Italy, both companies and end consumers.

To compensate a company for higher energy or other costs distorts competition in the marketplace and would ultimately start a subsidy race in the European Union that would not be in the common interest.

The first scheme was implemented by Italy in 2004 without prior notification to the Commission. Following competitors' complaints, the Commission opened an in-depth investigation on both measures. As a consequence, Italy discontinued the scheme that year. However, the following year Italy notified virtually identical subsidies in favor of the same three beneficiaries, plus Syndial, a chlorine producer also based in Sardinia. The Commission opened an in-depth investigation in April 2006 (IP/06/541). Italy has not implemented this second scheme.

The amount of aid paid in 2004 is estimated by Italy at around €12 million for Portovesme, €5 million for Eurallumina and € 300,000 for ILA.

This decision is in line with the Commission's practice regarding energy price subsidies in favor of selected companies. In November 2009, the Commission found an identical tariff enjoyed by Alcoa to be incompatible with EU state aid rules and ordered the recovery of the aid (see IP/09/1750). The same line was taken in 2007 in the similar "Terni" case (see IP/07/1727).